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Oliver Btirgel
The Internationalisation
of British Start-up Companies
in High-Technology Industries
With 11 Figures
and 58 Tables
ZEW
Zentrum fUr Europăische
Springer-Verlag Berlin Heidelberg GmbH WirtschaHsforschung GmbH
Centre for European
Economic Research
Series Editor
Prof. Dr. Wolfgang Franz
Author
Dr. Oliver Biirgel
London Business School
Sus sex Place
London NW 1 4SA
United Kingdom
Cataloging-in-Publication Data applied for
Die Deutsche Bibliothek - CIP-Einheitsaufnahme
Biirgel, Oliver: The intemationalisation of British start-up companies in high-technology industries / Oliver
Biirgel. ZEW, Zentrum fUr Europăische Wirtschaftsforschung GmbH. - Heidelberg; New York: Physica
Verl.,2000
(ZEW economic studies; VoI. 9)
ISBN 978-3-7908-1292-3 ISBN 978-3-642-57671-3(eBook)
DOI 10.1007/978-3-642-57671-3
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To Emma and Magda
Acknowledgements
Doing a PhD on internationally operating, entrepreneurial companies ended up
becoming a veritable act of cross-border entrepreneurship in itself.
It all began about three and a half years ago, when, apparently against all reason, I
decided to turn down the security of a three year fully-funded PhD grant from
another university to come to Warwick Business School. At the time, I was
tempted by Warwick's research reputation, its structured PhD programme and my
assigned supervisor, Gordon Murray, who appeared to be somewhat more
entertaining and communicative than the other academics I interviewed. (Time
proved that I wasn't wrong on any of these questions.)
I was intrigued by the idea that tiny start-up firms could build up international
activities. Like an entrepreneur who had all but his idea for a promising product, I
started communicating with future and existing backers. Numerous applications
for funding were written during my first year and my parents had to be convinced
that this was not just the latest well-crafted plot of their oldest son to avoid the
hardships of working life.
There were many initial drawbacks, starting from the comment of a leading
British professor in international business who told me "Young man, the firms
you're trying to research don't really exist" up to being a bit too honest during a
grant interview and - not surprisingly - being turned down by the trustees of the
foundation. I also soon realised that additional expertise in empirical research on
start-ups and their analysis was required. Help appeared in the form of Georg
Licht from the Centre for European Economic Research in Mannheim, Germany,
who immediately expressed interest in the topic. After initial discussions, we
decided to start a comparative Anglo-German research project on the
internationalisation of new, technology-based firms. Despite my frequent laments
and complaints, the funding saga ended like Gordon ("Cheer up, Oliver!")
predicted. Like venture capitalists who seem to ignore applications below a certain
threshold, the potential funding organisations reacted more positively to a
professional project that stretched over two countries and proposed both a large
scale survey and a considerable number of case studies (The fact that it was
VIII Acknowledgements
proposed by two renowned research institutions rather than a lonely PhD student
surely helped).
The remaining parts of the story are quickly told. After receiving fmancial support
- the vital ingredient for a PhD - we started developing a questionnaire and
identified a suitable primary database of start-ups. The various mailshots covered
a period of five months. I will never forget how the entire Frost family (Sheila,
Ian, Jo and Mark) came to my help during a long week-end when I underestimated
the time it took to prepare 2000 envelopes. All these hardships were forgotten as
soon as the dataset was cleaned-up and ready for analysis. During the summer
1998, the project team, with the help of Ferdinand Porak and Hans Nyctelius (both
MBA students at Warwick), carried out 40 interviews with managers of high-tech
start-ups. The results of the case studies are not part of the thesis, but the process
of analysing them has influenced me immensely in my thinking. Finally, I can
now present the end product to a larger audience. The long awaited moment to
thank everybody who helped me during that process has thus come.
Above all, this project would not have been possible without the fmancial support
from various organisations. The German Academic Exchange Service funded the
first two years of my PhD studies. Financial support in order to carry out the
Anglo-German research project has been provided by the Anglo-German
Foundation for the study of Industrial Society, Apax Partners and the UK
Department of Trade and Industry. The source data has been generously made
available by Dun & Bradstreet UK Ltd. I would like to thank several individuals
in these organisations for their support: Ray Cunningham at the Anglo-German
Foundation, Peter Englander at Apax Partners and Gerard Buckley and Olivier
Somenzi at Dun & Bradstreet UK.
Several entrepreneurs agreed to provide assistance during the pilot-testing of the
questionnaire. The discussions with Brian Docherty, Mike Freeling, Tony Macedo
and Anthony Dent provided an excellent "real life" test-bed for my ideas. In the
interview phase after the survey, my. conversations with 20 managing directors of
high-tech start-ups were invaluable sources of inspiration that put my theoretical,
literature-based knowledge of technology entrepreneurship into perspective. Given
the constraints on their time, the generosity of spending up to three hours with a
young researcher deserves my deepest thanks. My gratitude goes to - in random
order -John Bloomfield, Gerald Rutherford, Andrew Skinn, Bruce Savage, Martin
Rothman, Peter McGeehin, Mel White, Steve Kille, Stuart Penny, Tony Bickford,
Julian Hilton, Scott Blackstone, Mark Goble, Peter McCulloch, Peter Brooks,
Laurie Dickson, Alan Wyn-Davies, Simon Johnson, David Bailey, Alan Jones and
Philip Godfrey.
During the last years, I benefited from a flexible working arrangement with
Hewlett Packard's Business Alignment Team in Boblingen, Germany. I would like
to thank my colleagues there, in particular Boris Kim and John Wargin, for their
support, for sharing their personal and professional experiences with me and for
providing me with a healthy counterbalance to the life of a young academic.
Acknowledgements IX
My thanks go also to several members of the administrative staff of Warwick
Business School. Cath Aubrey from the School's Finance Office steered the
project calmly through the administrative cliffs of Senate House and kept the
financial side running smoothly. My arrival at Warwick coincided with the arrival
of Lesley Inness and later Jan Woodley who manage the administrative side of the
WBS PhD Programme. PhD students have seen a lot of improvements of their
working conditions over the last three years in terms of training and resources, and
both Lesley and Jan (and Belinda March) deserve a lot of credit for this. As the
focal point of the Marketing and Strategic Management Group, Sheila Frost soon
became one of the most important persons to me at the Business School. Whether
I desperately needed to speak to Robin or didn't know into which time zone
Gordon had disappeared - I could always count on Sheila's help. These things
matter a lot to a PhD student as they make life so much easier!
I also owe thanks to Solveig Nyvold and Matt Nichols, two MBA students at
Warwick, who completed their dissertation on the internationalisation of venture
capital backed start-ups just before my period of registration began. Although I
never met them in person, I learned enormously from their work, which paved the
way for my own contribution.
I would like to thank my thesis examiners, Professor David Storey from the
University of Warwick and Professor Harry Sapienza from the University of
South Carolina, for their constructive feed-back and valuable comments.
During the last years, I benefited immensely from the academic support given by
my German research colleagues and my two supervisors here at Warwick.
Andreas Fier and myself "hit it off' right from the start, which made him become
a friend rather than a colleague (A rather intense working week in Portugal surely
helped fostering that friendship). Georg Licht deserves enormous credits for
supporting me and my research ideas. Ever since we first met, he gave me the
impression of not having the slightest doubts about the positive outcome of the
project. He also taught me a great deal about econometrics and empirical research
on start-up companies. However busy Georg is, he somehow always seems to fmd
time when you ask him about things such as the nature of the error term in
Heckman selection models.
With my two supervisors, I had a relationship, both at the personal and academic
level, that many PhD students can only dream of. Robin Wensley provided
exceptional guidance throughout the overall process in his assured and calm way.
I benefited from Robin's wealth of experience in supervising PhDs as he was
always willing to share his thoughts on the process of doing a PhD and nature of
research. I have to admit that, frequently, I only understood what he was trying to
tell me long after he did actually tell me. But then again, it appears that I'm not the
only one who has these experiences with Robin.
My greatest thanks go to Gordon Murray, my principle supervisor, who
encouraged me throughout the last three years. He gave me the kind of support
that many PhD students dream of, but few experience. Not only did Gordon
X Acknowledgements
always find time to discuss my ideas and listen to my worries (provided that I
would find time to listen to him ... ), but he actively reacted in his entrepreneurial
way to make things happen, for example by sharing his network of contacts in
order to get funding and access to entrepreneurs willing to test the questionnaire.
This research is to a large extent the outcome of the combination of expertise,
guidance and support given by these four individuals.
Finally, I could have never accomplished this project without the support from
people that are close to me. Above all, over the last three and a half years, the
members of the PhD programme at Warwick Business School, particularly the
1995/96 intake, have shared the ups and downs of the PhD process with me. lanna
and Gerrardo have spoiled me with fantastic Italian food and great discussions,
especially during the first two years of the PhD when I stayed at Warwick. My
thanks go also to Bitten and Martin ("the office mate from heaven"), Andreas for
helping me with the mailings, Paula and Rob for being the perfect hosts (boy,
what you guys taught me about Australian wine ... ), Ruey-Lin for many
challenging discussions on epistemology and Manuela for doing a good job at
explaining the depths of my psyche to me.
In London, my flatmates during the last 2 Yz years, Bettina, Laure, Maria, Martina,
Natascha, Mark and Freddy, our "pet" Keith (he fell asleep after proof-reading the
first 3 pages of the introduction but saved himself through a timely intervention on
the day of submission of the thesis) and the "extended family" (Christophe and
Martine, Michael and Hyo-Yoon, Gis and Nada) created a pleasant habitat at Ivor
Street and provided moral support - even though they probably more than once
wondered why I did all that. During the last months in particular, Mark has been
caring "like a mother", taking care of the essential tasks in the house. In addition,
he went through the arduous task of proof-reading the thesis which substantially
improved its quality.
Over the past three years, I somehow seemed to concentrate my expressions of
frustration and excitement about the PhD process ( ... and there were many) on four
good friends. I am indebted to Klaus, Mark, Christophe and Michael for never
being tired of listening to me and for fmding the right words to say so many times.
Finally, my parents helped me enormously during the time I spent in higher
education. Knowing that they are there to support me wherever they can, helped
me immensely in my decision to do a PhD and to complete it.
I only now realise that my acknowledgements are four pages long. Maybe it gives
you an idea to what extent I'm grateful for the support of others in doing this work.
To all of you, a big
"Thank you!"
Oliver Burgel,
London, November 1999
Table of Contents
1. Introduction ....................................................................................... 1
2. Literature Review .............................................................................. 5
2.1. Technology-Based Start-ups / NTBFs ................................................. 5
2.2. Empirical Evidence on International Entrepreneurship ....................... 7
2.2.1. The Internationalisation of Start-ups:
Empirical Evidence from Case Studies ................................................ 9
2.2.1.1. The Studies .......................................................................................... 9
2.2.1.2. Conclusions from the Review of the Case Studies .............................. 18
2.2.2. The Internationalisation of Start-ups:
Empirical Evidence from Quantitative Surveys .................................. 21
2.2.2.1. The Studies .......................................................................................... 21
2.2.2.2. Conclusions from the Review of the Quantitative Studies .................. 27
2.2.3. Conclusions from the Review of Research in
International Entrepreneurship ............................................................ 30
2.3. Theories ofInternational Business ...................................................... 33
2.3.1. Overview of Different Theories ........................................................... 33
2.3.2. Internationalisation Process Theories and Stage Models ..................... 35
2.3.3. Internalisation and Transaction Cost Economics ................................ .40
2.3.3.1. Internalisation Theory ......................................................................... .40
2.3.3.2. Transaction Cost Economics .............................................................. .42
2.3.4. Firm-Specific Advantages .................................................................. .47
2.3.4.1. Monopolistic Advantage Theory ........................................................ .48
2.3.4.2. Resources, Organisational Capabilities and Knowledge .................... .49
2.3.5. Conclusions from the Review ofInternational Business Theories ...... 53
3. Research Objective and Development of Hypotheses .•.•.•.•••••••••••••• 57
3.1. Research Objective .............................................................................. 57
3.2. Research Hypotheses ........................................................................... 60
